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Our outlook for the global economy in 2012 and 2013 is slower growth than the last couple of years—about 3% global GDP growth in 2012—with quite a bit of differentiation between the strongest performers and the weakest performers.

Jan Hatzius

We are releasing our new global outlook for 2012 and 2013 in a period of substantial economic and financial market uncertainty for the Euro area. The ongoing shocks from the region’s sovereign crisis—and policy responses to them—are likely to be the biggest determinant of the outlook over the next few months.

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Highlights

For the world economy as a whole, our forecast for real GDP growth in 2012 is 3.2% and 4.1% for 2013.

We expect growth to slow in the US, although we still do not expect a recession.

We have made the biggest adjustment to our 2012 forecasts in the Euro area, where we now expect a deeper recession and only gradual stabilization late in 2012. But this is conditional on major policy changes in the region, probably involving a partial ‘mutualization’ of the existing debt stock supported by the European Central Bank.

In the emerging world outside Europe, and especially in China, we expect the spillovers to be smaller, although a key risk to this forecast lies in more substantial disruptions to global capital flows.